Hidden Divergence Indicates Sellers Losing Strength Quickly, Opening Door for Buyers

Forex

Economic

Summary:

This rejection at key technical confluence could offer buyers an opportunity to regain control and push to resume the broader uptrend, targeting the 0.5912 area.

BUY CADCHF

EXP

TRADING

0.57926

Entry Price

0.59100

0.57300

0.57965 +0.00251 +0.43%

0.0

Pips

Flat

0.57300

Exit Price

0.57926

Entry Price

0.59100

In Switzerland, July inflation delivered another downside surprise. The Consumer Price Index (CPI) slipped 0.1% month-over-month, missing market expectations that called for a flat reading. The main drag on price growth came from the transportation sector, where costs fell 0.4% on the month compared to the 0.6% increase expected by consensus.

Looking at individual components, domestic prices rose 0.5% year-over-year, while imported goods prices held steady compared to the previous year. This trajectory highlights easing pressures from imported energy costs, which had previously fueled the inflation pickup seen in earlier months following Middle East geopolitical tensions.

The Swiss National Bank's (SNB) latest outlook places average third-quarter inflation at 0.7% year-over-year. However, recent data suggests a milder path, with quarterly inflation tracking near 0.5%—roughly 0.2 percentage points below official forecasts. Declining fuel prices have been a key driver behind this slowdown, and if this trend holds, inflation could keep running below central bank projections.

In Canada, minutes from the Bank of Canada's (BoC) July meeting reflected a balanced posture among monetary officials. Policymakers view the economy as continuing to adapt to recent external shocks, maintaining forecasts for a gradual pickup in growth. However, they also voiced concern over the risk that medium-term inflation expectations might begin to edge higher.

Deliberations underscored the presence of upside inflation risks alongside downside risks to economic output. Key drivers of uncertainty include the trajectory of oil prices and trade friction with the United States. Furthermore, the BoC acknowledged that the recent surge in growth could prove temporary, warning that the threat of new U.S. tariffs remains a persistent drag on the country's economic outlook. Hidden Divergence Indicates Sellers Losing Strength Quickly, Opening Door for Buyers_1

Hidden Divergence Indicates Sellers Losing Strength Quickly, Opening Door for Buyers_1

Technical Analysis

CADCHF pulled back rapidly toward its ascending trendline, bouncing off the local support level at 0.5772. This zone proved critical for the bullish rejection, as price also bounced off the 100-period moving average located at 0.5772, while the 200-period average sits further below at 0.5732. This rejection at key technical confluence could offer buyers an opportunity to regain control and push to resume the broader uptrend, targeting the 0.5912 area.

Turning to the oscillators, the RSI dropped sharply toward the 32 level, printing a clear hidden divergence marked by lower price lows along the trendline against higher RSI readings, which indicates that sellers are losing strength quickly. Meanwhile, the MACD histogram continues to reflect a deep bearish reading, but the signal lines remain firmly inside positive territory; as momentum stabilizes, price could clear the way for a continued move higher.

Trading Recommendations

Trading direction: Buy

Entry price: 0.5792

Target price: 0.5910

Stop loss: 0.5730

Validity: Aug 31, 2026 15:00:00

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Hidden Divergence Indicates Sellers Losing Strength Quickly, Opening Door for Buyers

Technical Analysis

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